Asymmetric volatility spillover between crude oil and other asset markets

Bo Guan, Khelifa Mazouz and Yongdeng Xu
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Khelifa Mazouz: (Cardiff Business School

No E2023/27, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: This study uses the Multiplicative Error Model (MEM) to explore asymmetric volatility spillovers between crude oil and other major asset markets. We have extended the MEM of Engle et al. (2012) to include asymmetric volatility spillovers and developed the spillover balance as well as asymmetric spillover indexes. We have then allowed these indexes to vary over time. Our results reveal that the stock market is the dominant contributor to volatility spillover, while the crude oil is mostly the volatility spillover recipient. The asymmetric spillover effects are predominantly negative in the stock and crude oil markets and positive in the bond market. We further show that the spillover indexes are dynamic and influenced by specific events, such as the global financial crisis and the COVID-19 pandemic, as well as varying economic conditions.

Keywords: asymmetric volatility spillovers; global asset markets; Multiplicative Error Model (MEM); spillover balance index (search for similar items in EconPapers)
JEL-codes: C58 G10 G15 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2023-11
New Economics Papers: this item is included in nep-rmg
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Journal Article: Asymmetric volatility spillover between crude oil and other asset markets (2024)
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